Many years ago, a company that manufactured outdoor products that it sold in hardware stores across America came to us with the following problem:
Its Chinese manufacturer had (through a straw person) registered in China about a dozen trademarks that our new client used on its outdoor products. More importantly, the Chinese manufacturer had just informed our new client that it would no longer be manufacturing these outdoor products for our client because it was now going to be selling them directly to the same hardware stores to which our client had been selling the products.
The Chinese company never sold even one single product to anyone in the United States and in the end it lost tens of millions of dollars a year in revenue by having so unceremoniously cut-off our client. The Chinese company failed to sell any products to US hardware stores because it had zero clue what it takes to sell its products in the United States. The Chinese company went to the various hardware stores in the United States that had been selling “its” products and told them that it would now be able to sell them the exact same products for around 50% less. But when the US hardware store chains asked the Chinese company about the systems it had in place to make sure that each and every one of its stores would always have the right number of outdoor products in stock (i.e., what inventorying system it would be using) the Chinese company had no real reply. And when the US hardware store chains asked the Chinese manufacturer how it would handle product repairs and returns it had no answer for that either.
We worked with our client and figured out how to get around the Chinese trademarks the Chinese manufacturer had filed. To make a long story short, it had failed to trademark all of any one product and we were able to secure China trademark registrations for parts of the whole and it was on those parts that our client prominently put its trade name, after registering those trade names in China.
I thought of that Chinese outdoor products manufacturer today when I read a ZDNet article entitled, Big CES push from Chinese phonemakers, but tough sell in US. The gist of the article is that China is making excellent cellphones and smart phones these days but it has yet to sell anything but a handful of its phones in the United States and the big reason for much the same reasons why the Chinese outdoor products manufacturer failed to sell its own branded products:
“It’s one thing to have the product. It’s another thing to have all the relationships, build the distribution channels and do the marketing,” Frank Gillett, an analyst with Forrester Research, told the newswire. A partnership is particularly important in the U.S. where the majority of users buy heavily subsidized devices through carriers.
I have seen this same sort of thing in other industries in the United States where my law firm has represented Chinese companies unwilling to do what it takes to sell their China branded products in the United States. These companies have been unwilling to spend the kind of money required to market or distribute their products in the United States and, perhaps most importantly, they have been unwilling to hire top-tier people in the United States who know how to market to US consumers. I have heard countless similar stories from other service companies that work with Chinese companies trying to mark into the US market.
Succeeding at selling consumer products (really most products) in the United States virtually always requires more than just having the lowest price. Unless and until Chinese companies truly understand this (rather than paying it mere lip service), the threat of Chinese companies taking over the US consumer market is minimal at best.
What do you think?